The attractions of Holiday Lets

In the absence of viable alternatives, with ultra low interest rates and soaring property asset prices, investment ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - The attractions of Holiday Lets | LandlordZONE.

The attractions of Holiday Lets

In the absence of viable alternatives, with ultra low interest rates and soaring property asset prices, investment in property has become a phenomenon of 21st century Britain and holiday lets, holiday homes and holiday letting businesses are no exception.

Tax advantages  

In addition, there are some valuable tax advantages with holiday lets over buy-to-let properties. For example, capital gains tax on profits when you sell is lower with holiday lets and as it’s a business you can claim more expenses from your rent every year to reduce income tax.

Tax advantages like these can be a real boost when you see that some properties have achieved 25% increases in the first decade of the 21st century and this has continued.

Don’t think that your holiday cottage need be beside the sea: many of the tourist hotspots and Heritage Trail cities such as York, Stratford, Bath and Edinburgh can attract very good rents in the high season, and in some cases all year round, enabling you to easily cover mortgage costs.

City properties offer a safer year-round bet as it’s easier to continuously attract occupants off season, and you can always take advantage of the accommodation yourself, if you want to, as an added bonus. However, there are restrictions to “own use” in the tax rules – see below.

Tax Incentives for a Holiday Letting Business

Note, these rules can change – always check the latest rules on the valuable tax advantages

Holiday lettings is recognised as a business (generating earned income) by HM Revenue & Customs, unlike other forms of property letting which HMRC class as investment income (unearned income)

There are some valuable tax incentives for letting your property as a holiday home, but there are some exacting HMRC rules which you must follow:

– Your accommodation must be available for letting to the public for at least 210 days of the year and actual letting must be at least 105 days.

– Any one occupier (or group) cannot stay for more than 31 days in any period of seven months, but they can for the remaining five months.

– You cannot claim the tax incentives when you use the accommodation yourself, or when the property is not available for letting.

– The property must be fully furnished.

– The lettings must be at full market rent, not a peppercorn rent for friends and relatives.

– Your rental income is subject to income tax, but ALL expenses are allowable.

Allowable Expenses against Holiday Lettings Business Income

  • Repairs and maintenance
  • Decorating
  • Heating & lighting
  • Legal and letting agent’s fees
  • Management fees and cleaning costs
  • Insurance
  • Mortgage interest payments

Losses & Tax Advantages – Holiday Lettings Businesses

– In addition, if the business makes a loss, which it is likely to do in the early years, you can offset this against any other income you may have from any other source and thereby reduce your overall tax bill.

– Married couples can maximise tax allowances by having the property in the name of the lowest earner. This is particularly advantageous if the lowest earner is in the lower rate tax band and the higher earner is in the higher band.

– When you sell you holiday letting you will be subject to capital gains tax as you would if you sold a buy-to-let property, BUT at a more advantageous.

– You can avoid paying capital gains tax altogether if you invest the proceeds of your sale in another holiday letting property within 3 years – this is known as roll-over relief.

– Roll-over relief can also be used to avoid paying capital gains tax on sales of other types of businesses, where the proceeds are invested into a Holiday Lettings Business.

Your income and expenses for your holiday let business must be declared to HMRC on your annual self assessment tax return due any time from 31 October through to 31 January.

Mortgages for Holiday Homes and Lettings

One way to finance your holiday let is to increase the mortgage on your main residence.

Borrowing against your own home may mean you can buy a second home outright, or at least put down a substantial deposit.

Alternatively, you may want to buy an established holiday letting business from the owner which may include a portfolio of holiday cottages or town houses. Business finance is available from the banks.

Insurance for Holiday Homes and Lettings

In these days of higher risks and a litigious public, adequate insurance cover is vital. The types of cover you need to consider are:

  • Buildings cover – your mortgage company will insist on this
  • Contents cover – your own contents should be adequately covered, whilst your guests should cover their own contents and accidental damage to your property.
  • Public liability – covers you for civil actions brought by guests who may sustain injury on your property.
  • Employee liability – you are likely to employ casual labour in the process of running your small business and this cover is a legal requirement.
  • Loss of rental income cover – this can be had for a small percentage of the annual rental income.
  • Cancellation insurance – in case guests let you down.
  • Personal accident insurance – in case you are incapacitated at critical times.
  • Motor insurance for business use – you are likely to use you vehicle for the holiday letting business.

Holiday Letting – Bookings Scams

There have been many instances of holiday makers falling for bookings scams, but there have also been several instances of bookings scams on landlords reported recently. The aim of these is usually for the person booking the holiday to obtain your bank details, or sends a dud cheque / money order for more than the actual booking, then asks for a refund BEFORE the cheque clears. Always make sure the funds are in your bank before giving refunds and NEVER disclose you bank details.

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - The attractions of Holiday Lets | LandlordZONE.

Source : Landlord Zone More   

What's Your Reaction?

like
0
dislike
0
love
0
funny
0
angry
0
sad
0
wow
0

Next Article

Discover the benefits of smart meters – free webinar

Landlords are being encouraged to discover the benefits of smart meters at a free webinar which aims ©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Discover the benefits of smart meters – free webinar | LandlordZONE.

Discover the benefits of smart meters – free webinar

Landlords are being encouraged to discover the benefits of smart meters at a free webinar which aims to show how upgrading can bring benefits to everyone.

As part of the first smart meter awareness week, Smart Energy GB – the national campaign for the smart meter rollout – is running the event on Tuesday 19th October at 6.30pm when property expert Kate Faulkner, the National Residential Landlords Association and Citizens Advice will discuss everything smart meters for the private rented sector. Chaired by Fflur Lawton, head of public affairs at Smart Advice, the free virtual event will look at the benefits of having a smart meter installed, the installation process, and some of the myths around smart meters, followed by a Q&A session.

Responsibility

Smart Energy GB says there can be confusion as to who is responsible for installing a smart meter; its research has found that 40% of landlords believe that it is their responsibility to install a smart meter, while 39% believe it is the tenants. It adds that renting can be a significant obstacle to uptake of energy-efficiency behaviours because it can be difficult to persuade tenants to sign up for anything that requires installation, such as a smart thermostat or smart meter, because of the perceived or actual barrier of getting landlord permission. 

During the week, Smart Energy GB is hosting a webinar for letting agents and launching a dedicated page on its website with information about smart meters for the private rented sector, including new printable resources for landlords and letting agents. It will also be working with politicians in Westminster, Holyrood and the Senedd on Early Day and Parliamentary Motions to celebrate the success of smart meter awareness week. 

Sign up to the webinar by following this link.

©1999 - Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® - Discover the benefits of smart meters – free webinar | LandlordZONE.

Source : Landlord Zone More   

This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.